Sunday, September 1, 2013

Weekly Indicators: Labor (consumers) spends, corporations profit edition

 - by New Deal democrat

In the rear view mirror, second quarter GDP was revised upward. Corporate profits hit a new record. July monthly data included personal income and spending, both up slightly and flat in real, inflation-adjusted terms. The savings rate was also unchanged. Chicago area manufacturing improved slightly. Home price increases accelerated. Consumer confidence increased in August, but the two reporting series conflicted as to whether expecations were improved or declining.

This week's edition of the high frequency weekly indicators has been delayed a bit, due to a little holiday vacation enjoyment. Here they are:

Steel production from the American Iron and Steel Institute
  • -0.9% w/w

  • -1.9% YoY

Steel production over the last several years has been, and appears to still be, in a decelerating uptrend. Obviously there is some noise in the weekly numbers. It has been negative YoY for the last 3 weeks.

Employment metrics

Initial jobless claims
  • 331,000 down -2,000

  • 4 week average 331,2500 up +750

The American Staffing Association Index gained +1 to 97. It is up +4.4% YoY

Tax Withholding
  • $145.7 B for the first 21 days of August vs. $135.3 B last year, up +10.4 B or +7.7%

  • $130.8 B for the last 20 reporting days vs. $1116.8 B last year, up +14.0 B or +12.0%

Initial claims remain firmly in a normal expansionary mode. Like each of the last three years that this same, a good, downside breakout has occurred.

Temporary staffing had been flat to negative YoY for a few months, but has now also broken out positively. Tax withholding is back within its normal range for most of this year, although towards the weak end.

Consumer spending Gallup's 14 day average of consumer spending steadied this week after plummetting last week. The ICSC varied between +1.5% and +4.5% YoY in 2012, while Johnson Redbook was generally below +3%. The ICSC was weak, but Johnson Redbook remains at the high end of its range.

Oil prices and usage
  • Oil up +1.23 to $107.65 w/w

  • Gas unchanged at $3.55 w/w

  • Usage 4 week average YoY up +1.0%
The price of Oil retreated but remained near its 52 week high. The 4 week average for gas usage was, for the eighth week in a row after a long streak to the contrary, up YoY.

Interest rates and credit spreads
  • 5.55% BAA corporate bonds up +0.11%

  • 2.86% 10 year treasury bonds up +0.13%

  • 2.69% credit spread between corporates and treasuries down -0.02%
Interest rates for corporate bonds had been falling since being just above 6% in January 2011, hitting a low of 4.46% in November 2012. Treasuries previously were at a 2.4% high in late 2011, falling to a low of 1.47% in July 2012, and have decisively risen more than 1% above that mark. Spreads remain slightly above their recent new 52 week low this week. Their recent high was over 3.4% in June 2011.

Housing metrics

Mortgage applications from the Mortgage Bankers Association:
  • +2% w/w purchase applications

  • +6% YoY purchase applications

  • -5% w/w refinance applications
Refinancing applications have decreased sharply in the last 4 months due to higher interest rates, declining by more than 50% in total, and are now just about as bad as they have been at any point in the last 7 years. Purchase applications have also declined from their multiyear highs in April, but are still slightly up YoY.

Housing prices
  • YoY this week +10.7%
Housing prices bottomed at the end of November 2011 on Housing Tracker, and averaged an increase of +2.0% to +2.5% YoY during 2012. This weeks's YoY increase is yet another 7 year record.

Real estate loans, from the FRB H8 report:
  • up +14 or +0.4% w/w

  • up +0.4% YoY

  • +1.5% from its bottom
Loans turned up at the end of 2011 and averaged about 1% gains YoY through most of 2012.  Over the last few months, the comparisons have completely stalled.

Money supply

  • -0.1% w/w

  • -0.8% m/m

  • +6.7% YoY Real M1

  • -0.2% w/w

  • +0.4% m/m

  • +4.7% YoY Real M2
Real M1 made a YoY high of about 20% in January 2012 and eased off thereafter. Earlier this year it increased again but this week made a new 2 year low (although it is still positive).  Real M2 also made a YoY high of about 10.5% in January 2012.  Its subsequent low was 4.5% in August 2012. It increased slightly in the first few months of this year and has generally stabilized since, although it has declined slightly in the past several months.


Railroad transport from the AAR
  • -5000 carloads down -1.7% YoY

  • +300 carloads or +0.2% ex-coal

  • +7700 or +3.5% intermodal units

  • +3800 or +0.7% YoY total loads
Shipping transport Rail transport has been both positive and negative YoY in the last several months. This week was the third positive week in a row since then. The Harpex index had been improving slowly from its January 1 low of 352, but then flattened out for 9 weeks before tying its new 52 week high again this week. The Baltic Dry Index has rebounded to close to its recent 52 week high. In the larger picture, both the Baltic Dry Index and the Harpex declined sharply since the onset of the recession, and have been in a range near their bottom for about 2 years, but stopped falling earlier this year, and now seem to be in a slight uptrend.

Bank lending rates The TED spread is still near the low end of its 3 year range, although it has risen slightly in the last couple of months.  LIBOR established yet another new 3 year low.

JoC ECRI Commodity prices
  • down -0.49 to 124.04 w/w

  • +2.86 YoY

The paradigm for the last several months remained intact this past week. Negatives included a further increase in interest rates, a decrease in mortgage refinancing, and the still elevated price of Oil. Steel production was also a negative, as were commodity prices. Purchase mortgages and real estate loans were slightly positive, as were tax withholding payments. Money supply also weakened a little bit, although it is still positive.

Positives included consumer spending, temporary staffing, jobless claims, gas usage, bank rates, interest rate spreads, both rail and shipping transportation, and house prices.

So the story remains that several of the long leading indicators - interest rates and housing - are problematic, while two others - corporate profits and money supply - are still trending up. Shorter leading indicators also remain generally positive. Have a nice long holiday weekend.